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Why Obama's pushing for a mega-deal

By David Gergen, CNN Senior Political Analyst
  • David Gergen: An administration official explained to him Obama's push for mega-deal on debt
  • He says Obama thinks Dems will agree to entitlement cuts, but GOP not bending on taxes
  • He says Obama fears losing grand-bargain chance, damage to U.S. credit rating, markets
  • Gergen: Obama right to seek big deal, but should be ready for mini-deal rather than default

Editor's note: David Gergen is a senior political analyst for CNN and has been an adviser to four presidents. He is a professor of public service and director of the Center for Public Leadership at Harvard University's Kennedy School of Government. Follow him on Twitter.

(CNN) -- With a debt-ceiling crisis building in Washington, the administration on Tuesday opened another window into President Obama's thinking about the best ways to bring resolution.

On Monday, I wrote a piece arguing that the major players in the debt negotiations have all painted themselves into corners.

The Republicans were the first to lock themselves in, signing pledges during their campaigns promising not to raise taxes -- period. Democrats insist they won't accept any deal that doesn't have significant new revenues. And Obama on Monday promised to kill any compromise that is short term. If we are to avert a default, I wrote, all three parties must find ways out of their corners and compromise.

On Tuesday, a high-ranking official familiar with the president's thinking explained to me why Obama's opposition to a short-term solution makes sense. He made some persuasive points, though I still think that Obama may need some wiggle room before this is over.

The president clearly sees himself as the man in the middle trying to pull off a historic grand bargain. So far, he thinks that while Democrats will strongly resist, they would ultimately go along with entitlement reforms as a way to get a mega-package of some $4 trillion in savings over 10 years. There is give on their side, he believes. But there are no Bob Doles and Pete Domenicis on the Republican side willing to show similar flexibility on taxes.

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With prospects dimming for a mega-deal, the president is driving hard to ensure that whatever agreement emerges will keep the country below a new debt ceiling until February 2013. The administration calculates that it will need to raise the current debt ceiling between $2.5 trillion and $2.7 trillion to get to that point.

So far, the cuts in spending under discussion in the White House are significantly below that number. There is an additional "cut" that is available, but it has the appearances of a gimmick: The Congressional Budget Office has assumed that the costs of Iraq and Afghanistan will continue indefinitely, but get rid of those estimates, and presto, you get hundreds of billions in "savings."

Gimmicks alone will not suffice. So, from Obama's point of view, the Republicans should agree to some forms of revenue increases, and House Speaker John Boehner must drop his insistence that spending cuts must exceed -- dollar for dollar-- the size of the debt ceiling increase.

The president feels strongly that an interim agreement for 30, 90 or even 180 days is a very bad idea. That would let a moment of opportunity slip away. It would push negotiations closer and closer to elections, so that agreements would be harder to reach. And, very importantly, it could easily spook the financial markets, which will worry that U.S. politicians truly are unable to solve the problem.

The White House is very aware of the warnings that Standard and Poor's and other credit agencies have issued, threatening to downgrade the country's AAA credit rating if a long-term plan is not in place by January 2013. A downgrade, the president believes, would be like a new tax on Americans, costing billions.

For all these reasons, the president is adamantly against a short-term solution and wants a deal that is at least in the range of $2.5 trillion to $2.7 trillion.

He's exactly right about his arguments -- just as he deserves more credit than he is getting for trying to get both Democrats and Republicans to compromise. A short-term solution has always been the least desirable option.

But here's the catch: What if the parties won't compromise on a mid-level deal? What if all they can come up with is an interim patch that keeps talks going, even though our credit rating is threatened?

I have argued for some weeks that a short-term fix seems likely. former President Bill Clinton argued the same thing last week in his appearance at the Aspen Institute. The highly respected Bill Galston argued the same Monday in The New Republic.

So, Mr. President, go for a big deal -- the country needs it -- but in the event that a mini-deal is the best you can get, it is far better than a default. Keep some wiggle room, please.

The opinions expressed in this commentary are solely those of David Gergen.

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